Mexico - Basic economic report (Vol. 4 of 6) : The future

rt E9,,;'i,''''4 1972/74 DOCUMENT OF INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT INTERNATIONAL DEVELOPMENT ASSOCIATION Not For Public Use Report No. 192-ME THE ECONOMY OF MEXICO A BASIC REPORT (in Six Volumes) VOLUME IV THE FUTURE June 27, 1973 Latin America and the Caribbean Department This report was prepared for official use only by the Bank Group. It may not be published, quoted or cited without Bank Group authorization. The Bank Group does not accept responsibility for the accuracy or completeness of the report.  CURRENCY EQIVALENTS US$1 = Mex$12.5 Mex$1 = Us$0.08 Mex$1 million = US$80,000 FISCAL YEAR January 1 - December 31  192-ME, THE ECONOMY OF MEXICO A BASIC REPORT (in six volunes) VOLUME IV THE FUTURE June 27, 1973 Latin America and the Caribbean Department   CONTENTS Chapter Page I INTRODUCTION 1 II POPULATION 2 A. POPULATION SIZE 2 B. RURAL-URBAN DISTRIBUTION 2 III WELFARE AND EMPLOYMENT 8 IV EMPLOYMENT, TECHNOLOGICAL CHANGE AND ECONOMIC GROWTH 16 A. TECHNOLOGICAL CHANGE 16 B. GROWTH 17  LIST OF TABLES Table Number Title IV-II-i Population Projection 1 : 1970-2000 IV-II-2 Population Projection 2 : 1970-2000 IV-II-3 Population Projection 3 : 1970-2000 iv-ii-4 Rural-Urban Population Projection : 1970-2000 IV-III-i Economically Active Population 1970-2000 IV-III-2(a) Enployment and Growth (at 6.3 percent growth) (b) (c) IV-III-3 International Cross Section Analysis Data IV-IV-i Major Rivers in Mexico IV-IV-2(a) Annual Rainfall in Mexico IV-IV-2(b) Climatic Zones in Mexico IV-IV-3 Water Availability and Industrial and Domestic Demand by Region - 1965 IV-IV-4 Projected Domestic and Industrial Water Demand - 2000 IV-IV-5 Projected Demand and Supply of Major Agricultural Products - 2000 IV-IV-6 Irrigation Requirements - 2000 IV-IV-7 Energy Parameters IV-IV-8 Estimated Growth in GDP and Energy Consumption IV-IV-9 Projections of Mexican Energy Consumption IV-IV-i0 Estimated Demand for Oil and Gas IV-IV-il Production of Crude Petroleum, Condensates and Natural Gas Liquids 1961-1971. Projected 1971-2000.  I. INTRODUCTION 1. The long run perspectives of economic and social change in Mexico are affected by somewhat different parameters than those which were relevant to the assessment of historical change and to short and medium run projections. In seeking, in the Chapters which follow, to assess these trends, the framework of analysis is inverted. Whereas consumption has been previous- ly treated as a function of economic growth, it is regarded here as the end to which economic growth is the means. 2. This exercise does not, however, represent an attempt to predict future trends in output and consumption but rather to focus on the broad economic issues which may emerge over the next three decades and which are likely to determine the quality of life of the Mexican population in 2000 A.D. It therefore contains neither a blueprint for the future nor a panacea for the problems which may arise, although some general policy implications emerge. 3. The discussion begins with an assessment of demograph- ic trends through 2000 A.D. (Chapter II). This provides a basis for an exercise relating employment (which is assumed to be a key determinant of trends in consumption) to technoloaical change and economic growth (Chapter III). The final chapter (IV) contains a brief (but non-predictive) assessment of alternative techno- logical and economic trends, taking particular account in the latter case of physical constraints to growth. 4. The analysis is not (nor is it designed to be) con- clusive. Moreover, it excludes the role of the public sector from any specific consideration. This does not mean that it is assumed the public sector will no longer be (as a producer of "publict' goods and services such as education and health) a major determinant of the level and distribution of consumption. On the contrary, it is implicitly assumed (following the argument pre- sented in Volume III), that its role will continue to develop. It is not however within the purview of this Report to consider the long run structural relationships between the public and private sectors in the Mexican economy, although the focus on employment as a parameter of consumption should not be construed as in any sense implying that consumption is exclusively a mat- ter of "private" goods and services.   II. POPULATION A. POPULATION SIZE 5. The mid-year population in 1970 was 50.4 million and was growing at an average annual rate of 3.5 percent. In project- ing possible trends of population increase through 2000 A.D., it is assumed that life expectancy at birth, in the light of recent and probable future trends in mortality, is likely to rise from 60.0 years for males and 63.8 years for females in 1970 to 68.4 and 70.4 years, respectively, in 2000 A.D. Second, it is assumed that fertility may continue at the recent level, or may alterna- tively decline, the rate of decline depending on the efficacy and success of population planning. It is estimated that the range of fertility in 2000 may thus vary from 6.3 to 3.5 children per woman. The latter assumptiorn would imply a decline in fertility of 46 percent from 1970 to 2000 which, although not out of the question, is at least improbable and would be conditional on a dramatic effort in terms of family planningl/; a more limited de- cline in fertility, assuming that population planning programs are developed with moderate success, appears more realistic. 6. Given these assumptions about life expectancy and fertility, three population projections are shown in Tables IV-II-1, IV-II-2, and IV-II-3, the variable factor being fertility. It is considered that the intermediate projections (shown in Table IV-II-2 and referred to hereinafter as Projection No. 2), which indicates a population of about 140 million in 2000 A.D., may be the most real- istic. It will be observed that the range of population size in 2000 A.D. varies from 122 million to 152 million - a difference of 30 million. This, in itself, is not an enormous contrast. If, however, the end year (2000 A.D.) population is regarded as the base year for population growth from 2000 A.D. to, say, 2050 A.D., the implications are very significant; the extrapolation of the highest and lowest trends over a longer period would naturally accentuate the contrasts between them. B. RURAL-URBAN DISTRIBUTION Any projection of the rural-urban distribution of popu- lation is necessarily tentative because it must rest on assumptions about migratory trends in the light of recent trends which have em- phasized a lower rate of population increase in rural than in urban areas. Whereas the overall rate of growth in 1950-1970 was in the j A spontaneous decline in fertility could of course have a com- parable effect. This could come about if the relationship bet- ween urbanization and fertility in Mexico were to approximate those of other parts of Latin America, where in general urban- ization has been associated with greater fertility declines than has been the case in Mexico.   Table IV -II-1: Mexico: Population Projection 1 for the Period 1970-2000 1970 1975 1980 1985 1990 1995 2000 Total Population (July 1) 50,417 60,071 71,925 86,539 104,399 126,092 152,458 Males 25,246 30,133 36,174 43,663 52,820 63,942 77,455 Females 25,171 29,938 35,751 42,877 51,579 62,150 75,003 Crude Birth Rate (Per thousand pop.) 43.1 43.2 43.5 43.7 43.5 43.2 43.0 Crude Death Rate (Per thousand pop.) 8.6 7.7 6.9 6.3 5.8 5.3 4.9 Growth Rate (Pct.) 3.46 3.55 3.65 3.73 3.77 3.78 3.81 Total Fertility Rate 6.538 6.538 6.538 6.538 6.538 6.538 6.538 Life Expectancy at Birth (in years) Male 60.03 62.03 64.03 65.43 66.43 67.43 68.43 Female 63.75 65.35 66.35 67.35 68.35 69.35 70.35 Age Distribution (January 1) Total 49,545 60,005 70,611 84,924 102,434 123,706 149,553 0- 4 9,163 10,915 13,199 16,066 19,472 23,479 28,341 5- 9 7,645 8,989 10,748 13,037 15,903 19,306 23,312 10-14 6,375 7,600 8,944 10,701 12,987 15,849 19,249 15-19 5,155 6,326 7,550 8,893 10,647 12,929 15,787 20-24 4,144 5,096 6,263 7,484 8,823 10,572 12,849 25-29 3,366 4,086 5,034 6,196 7,412 8,747 10,492 30-34 2,820 3,314 4,031 4,975 6,130 7,341 8,673 35-39 2,396 2,769 3,261 3,974 4,911 6,059 7,265 40-44 2,046 2,341 2,712 3,202 3,908 4,836 5,975 45-49 1,694 1,983 2,276 2,644 3,126 3,822 4,737 50-54 1,335 1,622 1,905 2,192 2,551 3,022 3,703 55-59 1,065 1,252 1,528 1,800 2,077 2,423 2,878 60-64 888 968 1,144 1,402 1,657 1,917 2,244 65-69 658 766 841 1,000 1,230 1,460 1,698 70-74 430 523 613 678 811 1,003 1,198 75+ 366 454 563 681 789 940 1,153 Source: Mission Estimates  Table IV-II-2: Mexico: Population Projection 2 for the Period 1970-2000 1970 1975 1980 1985 1990 1995 2000 Total Population (July 1) 50,417 59,928 71,282 84,892 100,763 118,946 139,643 Males 25,246 30,060 35,846 42,821 50,960 60,284 70,896 Females 25,171 29,868 35,436 42,071 49,803 58,661 68,747 Crude Birth Rate (Per thousand pop.) 43.1 42.2 41.7 41.1 39.5 38.0 36.5 Crude Death Rate (Per thousand pop.) 8.6 7.6 6.9 6.3 5.8 5.3 5.0 Growth Rate (PCT.) 3.46 3.46 3.48 3.48 3.37 3.26 3.16 Total Fertility Rate 6.538 6.376 6.218 6.034 5.738 5.457 5.190 Life Expectancy at Birth (in years) Male 60.03 62.03 64.03 65.43 66.43 67.43 68.43 Female 63.75 65.35 66.35 67.35 68.35 69.35 70.35 Age Distribution (January 1) Total 49,545 58,892 70,040 83,415 99,064 117,006 137,439 0- 4 9,163 10,802 12,738 15,122 17,599 20,127 22,890 5- 9 7,645 8,989 10,637 12,583 14,969 17,449 19,984 10-14 6,375 7,600 8,944 10,535 12,535 14,918 17,398 15-19 5,155 6,326 7,550 8,893 10,537 12,479 14,860 20-24 4,144 5,096 6,263 7,484 8,823 10,463 12,401 25-29 3,366 4,086 5,034 6,196 7,412 8,747 10,383 30-34 2,820 3,314 4,031 4,975 6,130 7,341 8,673 35-39 2,396 2,769 3,261 3,974 4,911 6,059 7,265 40-44 2,046 2,341 2,712 3,202 3,908 4,836 5,975 45-49 1,694 1,983 2,276 2,644 3,126 3,822 4,737 50-54 1,335 1,622 1,905 2,192 2,551 3,022 3,703 55-59 1,065 1,252 1,528 1,800 2,077 2,423 2,878 60-64 888 968 1,144 1,402 1,657 1,917 2,244 65-69 658 766 841 1,000 1,230 1,460 1,698 70-74 430 523 613 678 811 1,003 1,198 75+ 366 454 563 681 789 940 1,153 Source: Mission Estimates  - 5 - Table IV -II-3 Mexico: Population Projection 3 for the Period 1970-2000 1970 1975 1980 1985 1990 1995 2000 Total Population (July 1) 50,417 59,786 70,538 82,428 95,165 108,133 121,606 Males 25,246 29,988 35,466 41,561 48,096 54,750 61,664 Females 25,171 29,798 35,072 40,867 47,069 53,383 59,942 Crude Birth Rate (Per thousand pop.) 43.1 41.3 38.9 36.4 32.8 29.6 27.8 Crude Death Rate (Per thousand pop.) 8.6 7.6 6.8 6.2 5.7 5.3 5.1 Growth Rate (Pct.) 3.46 3.37 3.21 3.02 2.71 2.43 2.26 Total Fertility Rate 6.538 6.218 5.735 5.184 4.498 3.902 3.527 Life Expectancy at Birth (in years) Male 60.03 62.03 64.03 65.43 66.43 67.43 68.43 Female 63.75 65.35 66.35 67.35 68.35 69.35 70.35 Age Distribution (January 1) Total 49,545 58,779 69,405 81,184 93,876 106,819 120,230 0- 4 9,163 10,690 12,214 13,518 14,622 15,092 15,812 5- 9 7,645 8,989 10,527 12,066 13,382 14,499 14,987 10-14 6,375 7,600 8,944 10,481 12,020 13,337 14,457 15-19 5,155 6,326 7,550 8,893 10,428 11,966 13,285 20-24 4,144 5,096 6,263 7,484 8,823 10,355 11,891 25-29 3,366 4,086 5,034 6,196 7,412 8,747 10,276 30-34 2,820 3,314 4,031 4,975 6,130 7,341 8,673 35-39 2,396 2,769 3,261 3,974 4,911 6,059 7,265 40-44 2,046 2,341 2,712 3,202 3,908 4,836 5,975 45-49 1,694 1,983 2,276 2,644 3,126 3,822 4,737 50-54 1,335 1,622 1,905 2,192 2,551 3,022 3,703 55-59 1,065 1,252 1,528 1,800 2,077 2,423 2,878 60-64 888 968 1,144 1,402 1,657 1,917 2,244 65-69 658 766 841 1,000 1,230 1,460 1,698 70-74 430 523 613 678 811 1,003 1,198 75+ 366 454 563 681 789 940 1,153 Source: Mission Estimates  - 6 - Table IV-II-4 :Mexico: Projections of Population under Three Assumptions of Fertility for the Whole Country and Assuming Raral Population Grows at 2 per cent a Year (Thousands) Rural Population 1970 1975 1980 1985 1990 1995 2000 Projection 20,893 23,068 25,468 28,119 31,046 34,277 37,844 Urban Population Projection I 29,524 37,003 46,457 56,420 73,353 91,815 114,614 Projection II 29,524 38,860 45,814 56,773 69,717 84,669 101,799 Projection III 29,524 36,718 45,070 54,309 64,119 73,856 63,762 Rulral Population as Percentage of Total Population Projection I 0.414 0.384 0.354 0.325 0.297 0.272 0.248 Projection II 0.414 0.385 0.357 0.331 0.300 0.268 0.271 Projection III 0.414 0.366 0.361 0.341 0.326 0.317 0.311 Source: Mission Estimates  - 7 - order of 3.5 percent, the rural population increased at an annual rate of only 1.8 percent. Migratory behaviour in Mexico as in other Latin American countries is not fully understood but it is evident that migratory incentives are not exclusively economic (i.e., job-related) but also refer to aspects of social opportun- ities and, at less significant levels, to political, intellectual and other cultural opportunaties which are, in general, greater in urban than in rural areas.1/ 8. Iv. seems clear that migratory movements have been im- perfectly adjusted to contrasts in employment conditions, a direct consequence of which has been the growth of marginal employment in urban economies, reflected in the size of the service sector. How- ever, migratory movement is probably better adjusted to rural-urban differentials in terms of other kinds of opportunity, particularly those which derive from public seetor services such as education and health. 9. Given these considerations and in 'ht,e absence of any firm assumptions about structural change of the kind which would imply a radical departure from past trends, it is assumed that the rural population will increase at a rate of about 2 percent a year through 2000. If the trend were to vary it would probably do so with an upward adjustment since the urban population would, on the basis of a rural growth rate of 2 percent and an end year total population of 140 million in 2000 A.D., amount to 73 percent of the total. j See Volume II, para. 154  III. WELFARE AND EMPLOYMENT 10. A fundamental parameter of social change is the size of the economically active population which, on the basis of popu- lation Projection No. 2 (Table IV-II-2) is estimated at 40 million in 2000 A.D. (Table IV-III-I). By comparison with the economically active population in 1970 (13 million), this would assume some de- cline in the participation of those aged under 14 and over 64 and some increase in the participation of women, and would imply almost no change in the size of the economically active population as a pro- portion of the working age population (42 percent in 2000 A.D. against 41 percent in 1970). Further details of assumptions on the size of the economically active population are given in Tech- nical Note # 11. Table IV-III-1: MEXICO : POPULATION IN WORKING AGES AND ECONOMICALLY ACTIVE POPULATION BY SEX ACCORDING TO POPULATION PROJECTION 2 1970-2000 (in thousands) 1970 i 1975 1980 1985 1990 1995 2000 Population Aged:-/ 10-1-4 6,375 7,600 8,944 10,591 12,535 14,928 17,398 15-64 24,909 29,757 35,704 42,762 51,132 61,100 73,119 65 and over 1,454 1,743 2,017 2,359 2,830 3,403 3,049 TOTAL 32,738 39,100 46,665 55,712 66,497 79,440 94,566 Economically Active Population 10-14 (Males 419 493 581 659 819 977 1,14o Females 158 191 224 265 313 371 433 15-64 (Males 9,995 11,972 14,44o 17,407 20,439 25,162 30,212 Females 2,310 2,755 3,300 3,937 4,685 5,574 6,609 65 and over(Males 482 577 653 754 904 1,085 1,288 Females 88 105 122 145 175 211 249 Sub-Total (Males 10,896 13,042 15,674 18,850 22,662 27,224 32,640 Females 2,556 3,091 3,646 4,347 5,173 6,156 7,321 TOTAL 13,453 16,093 19,320 23,197 27,835 33,380 39,961 a/ Figures for 1970 corrected for underenumeration and age distribution. i Population as of January 1st each year.  - 9 - 11. It is often argued that productive employment is a sine qua non of individual self respect and is therefore a basic determinant of welfare. A job can thus be seen as an end in itself as well as a means to the end of obtaining the necessary purchlsing power to satisfy needs and desires, assuming a distinction between these two concepts based on the notion that the former refer to such t'irreducible"' human requirements as food, clothing and shelter and the latter to all other types of demands. It has been argued (Volume II, Chapter IV) that the extent of unemployment in Mexico is a less relevant determinant of social conditions than the extent of underemployment, because those who lack useful occupations seem to turn to whatever means of self-support are available. These now include such familiar forms of activity as petty street vending and menial service occupations in towns and cities and low productivity agriculture. The grow,th of margin- al employment in recent decades has been concentrated in the urban service sector and it seems likely that this trend will continue since it has also been assumed that a high rate of rural-urban migration will persist. 12. For purposes of illustrating the relationship bet- ween labor force growth, GDP growth and technological change, an exercise is presented in Table IV-III-2. The labor force figures shown are those which have been projected but the GDP growth rate of 6.3 percent (the 1950-1970 average) is not a predicted growth rate and is chosen only for purposes of illus- tration as is the assumption that the relationship between the growth of productivity in industry and agriculture and the growth of output in these sectors would be in line with past trends. This combination of factors would imply a substantial increase in employment in "othert" sectors (Table IV-III-2a) and, in turn, a consequent increase in marginal employment. The basis for this conclusion is shown in Table IV-III-2b, which indicates that if past levels (1950-1970) of productivity in "other" sectors were maintained, the amount of employment required would be subs- tantially less than that shown in Table IV-III-2a. The difference amounts to 10.6 million employees - about 25 percent of the pro- jected labor force in 2000 A.D. 13. The distribution of sectoral employment derived from this illustration (18 percent in industry, 15 percent in agricul- ture, and 66 percent in other sectors) is of course a reflection of a large amount of marginal employment in "other" sectors. This is emphasized in Table IV-III-2c, which shows the effect of re- moving marginal employment from the economically active population.  - 10 - Table IV-III-2(a) : MEXICO: EMPLOYMENT AND GDP GROWTH (6.3 percent GDP growth) (1960 Pesos) (000's) 1950